Deciphering stablecoins: A financial stability risk?

Elliot Gulliver-Needham
clock • 6 min read
Regulators have taken increasing note of stablecoins
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Regulators have taken increasing note of stablecoins

Stablecoins have increasingly become part of the cryptocurrency ecosystem. Tether, the most popular stablecoin, is also the most traded cryptocurrency, with several billion dollars of it circulating daily.

Unlike normal cryptocurrencies, stablecoins are pegged to a fixed amount - normally the dollar - either through backing with assets or an algorithmic process. Therefore, they have little use as a speculative asset class. So why should institutional investors be interested in stablecoins, and why are regulators such as the Bank of England so worried about them? Stablecoins have increasingly attracted attention from regulators, with BoE governor Andrew Bailey saying last year that he was "sceptical" that stablecoins could ever be a safe asset. Last week, a consultation paper suggested the ...

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